Origination Fee
The origination fee is a charge levied on the borrower to cover the costs associated with processing a mortgage application and creating the home loan. Typically quoted as a percentage of the total loan amount, origination fees usually amount to about 1% of the mortgage.
The term “origination” refers to all the steps involved in establishing the mortgage loan. This process begins when you submit your loan application along with supporting documentation, such as pay stubs and employment history. Your loan officer, known as the “loan originator,” initiates the process by pulling your credit score and submitting all necessary information to an underwriter, who ultimately determines your eligibility for the loan.
The origination fee is also commonly referred to as a mortgage point and is paid to the loan originator at the closing of the mortgage transaction. This fee functions similarly to a commission and serves as the loan originator’s compensation for facilitating the loan process and providing you with financing options. Understanding the origination fee and what it covers is an important aspect of budgeting for your mortgage costs.
